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Real Estate

Housing starts increase, but builders still lack supplies

Completions down as material constraints continue

Housing starts increased 6.3% to a rate of 1.64 million in June, as construction companies broke ground on a greater number of both single-family and multifamily buildings last month. But crucial supply issues are preventing future builds from getting off the ground.

Per the most recent study from the U.S. Census Bureau, starts are up 29% year over year, though the comparison is skewed due to the COVID-19 pandemic.

Single‐family housing starts in June were at a rate of 1,160,000, up from 1,091,000 in May. Single‐family housing completions, however, were at a rate of 902,000 — down from May’s revised rate of 961,000.

It’s the third-highest number of housing starts builders have broken ground on in one month since May of 2006, a sign of strong buyer demand. But the decrease in permits is also a signal that difficulties persist, said Matthew Speakman, Zillow economist.

“Construction activity could be even higher given a bit more long-term certainty and an easing of critical supply chain volatility,” Speakman said. “While lumber prices have fallen back to earth after the prolonged surge that began last spring, disruptions are now pushing up prices of other key building materials — including steel, concrete, and lighting, and making other important supplies very difficult to come by.”

Speakman said there are currently “multi-month delays” in the delivery of windows, heating units, refrigerators and other items builders need to complete new homes, forcing builders to cap activity. The past three months, in particular, have forced homebuilders to alter their approach when it comes to beginning new projects. In many cases, homebuilders have limited the sales of custom homes and capped volume so as to not burn through their existing inventory of materials.

“June will go down as a very solid month, and also one symbolic of the month-to-month struggle that builders face,” he said. “It’s also a reminder of just how creative they are being, and will need to continue to be to get past significant obstacles and deliver for a market starved for new housing supply.”

Privately‐owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,598,000, while single‐family authorizations were at a rate of 1,063,000.

Regionally, both the Northeast and the Midwest saw declines in housing starts, while the South and West both saw increases. The West, specifically, saw a 13% monthly increase to the highest level of starts since February.

The country still lacks an adequate supply of inventory, noted George Ratiu, senior economist. If the homes are there, people will buy them — even as prices remain high, he said.

“While construction companies work to balance lumber costs returning to earth with increases in labor and development costs, the market shortage of about four million homes remains an obstacle yet to overcome,” Ratiu said. “Millions of buyers are eager and able to buy, if only they can find the right home at an affordable price.”

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